Towns Warned On BPOL
Published 2:27 pm Tuesday, December 10, 2013
FARMVILLE — The Virginia Municipal League warned its member localities, such as Farmville, that local government would “take a devastating hit” if the BPOL tax became based on net rather than gross receipts.
VML’s conclusion was based on the Joint Legislative Audit and Review Commission’s (JLARC) study on the issue—released this fall—which concludes that shifting to net income would have reduced revenue to localities across the state by 95 percent last year, or from $680 million in local tax revenue across the commonwealth to $37 million.
Farmville’s town council is not surprised but is concerned because the BPOL tax is the Town’s second largest source of revenue, generating approximately $1.2 million.
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Town Council raised its concern directly with 60th District House of Delegates member James E. Edmunds during a recent legislative luncheon hosted by Prince Edward County and found a sympathetic ear.
Delegate Edmunds cited his experience as a member of the Halifax County Board of Supervisors and said, “I remember having these exact conversations with our board members and…with our delegate and (saying) ‘Why in the world are you guys tying our hands like this?…So I’m with you a hundred percent.”
Edmunds represents Prince Edward County, and thus most of the Town of Farmville, and he told Town officials “I am not in favor of eliminating what few opportunities you guys have (to raise revenue).”
The question Farmville officials have been asking themselves is where the Town would find alternative revenue if the General Assembly finally follows through on its annual dalliance with BPOL reconstruction or eradication.
Town council members expect that cuts in service would have to be coupled with increases in existing revenue streams and/or creation of new sources of municipal income.
“It’s kind of interesting to see, only 60 percent of the businesses pay either a small fee or no tax at all,” Farmville town manager Gerald Spates told council member in reference to the JLARC study’s statewide findings. “…And 90 percent of the BPOL revenue is generated from businesses with over a million dollars (in annual gross receipts)” across Virginia.
The JLARC study was commissioned by the General Assembly in response to business complaints that BPOL’s basis on gross receipts is unfair.
“One of the big arguments (against BPOL) that we always hear,” council member David E. Whitus said during the discussion on the JLARC study, “…and I understand it, is the businesses think BPOL is an unfair tax. It’s on gross profits. It’s not net. A business could actually be losing money and still have to pay BPOL tax, and I understand (the business complaints).”
Which is one side of the tax coin, whether it is rendered unto Caesar or not.
“But from our side, from the government side, if (BPOL) goes away the (revenue) hole has to be filled, some how, some way,” Whitus reasoned regarding the flip side of the tax coin. “It is to be filled. How do you fill it?”
That question prompted this answer from Spates: “Either you fill the hole,” he said, “or you eliminate some services.”
There was no argument from Whitus or anyone else on town council.
“That’s the part they (BPOL opponents) don’t seem to understand,” said Whitus, one of three members of town council’s finance committee. “They want the tax to go away but they don’t understand that if the tax goes away services have to go away or another tax has to be created.”
Whitus and Spates continued their observations, with the former noting, “I’ve had some local folks say, ‘Hey, my business actually lost money but I still had to pay X in BPOL tax’ and I can understand that. I get it.”
But, Whitus added, “There’s not a simple, easy fix.”
Does the state, Spates wondered, “leave the BPOL tax or do you add an additional sales tax that comes back to the locality?”
Currently, the sales tax bucks received by the Town do not land in the municipal treasury with a big bang.
“We don’t get the sales tax. We get 18 percent of one percent,” Spates noted.
“Not much” is the two-word analysis Whitus employed to describe current sales tax revenue.
“No, it isn’t,” the town manager agreed.
Council member Sally Thompson does not foresee anybody enthusiastically leading the cheers for whatever the state chooses to do, or not do.
“People, she said, “will not be pleased whichever way it is (resolved).”
Spates wasn’t thinking of positive and happy reactions when he calculated the real estate tax increase that would be necessary to equal the Town’s BPOL revenue.
“On real estate, to pick up $1.2 million you’d have to triple your real estate tax,” he said.
“And that would place such a burden on people,” Whitus concluded. “That would be unbearable.”
Offering another laconic description, Spates summed up the situation with two words.
“It’s tough,” he said.
Delegate Edmunds understands the dilemma of trying to raise revenue to replace any lost BPOL tax revenue.
“Your only option…is to put it on the real estate tax and that just continues to diminish homeowners and landowners,” the delegate told Town officials during the legislative luncheon. “And, certainly, I don’t think they should be paying the lion’s share of all the services that are provided.”